Pakistan’s Circular Debt Crosses Rs 1 Trillion Mark

Pakistan has added a whopping Rs 566 billion in circular debt, in addition to the old stocks of about Rs 500 billion that were placed in a special purpose vehicle. The total circular debt now stands at Rs 1.066 trillion.

A special Senate committee was notified of the same during a meeting on Wednesday. The committee emphasized that both the government and people of Pakistan should be made aware of the circular debt of Rs 566 billion and this problem must be addressed as soon as possible.

The committee met with the Ministry of Energy (Power of division) under the chairmanship of Senator Shibli Faraz on Wednesday where the matter was discussed in great depth. The Ministry of Energy (Power division) proposed that in order to clear these accounts from circular debt, it is essential to restructure the energy policy, especially for the power distribution companies.

Waseem Mukhtar, the Additional Secretary of Power division highlighted the fact that only those professionals with no vested interests and malicious intent must be brought into the power distribution companies.

The power distribution companies, however, claimed that approximately Rs 100 billion circular debt was caused by unjustified sales tax collections by the Federal Board of Revenue, even on unrealized bills. They further argued that they were being subjected to over-taxation. The committee further instructed the National Electric Power Regulatory Authority (Nepra) and the finance ministry to attend the next meeting and come up with a summary to address these issues.

Major Factor Behind the Recent Increase

One of the reasons for the significant increase in the circular debt in recent months was that the PML-N government decided in October 2017 to end load-shedding even in areas where electricity theft was high.

An official from Peshawar Electric Supply Company (Pesco) supported the statement and stated that Pesco’s total loses stood at Rs 4 Billion in the first four months of 2017 but quickly surged to Rs 40 Billion by the end of the year after the cabinet decided to provide electricity to those areas where electricity theft was high.

Counter-Measures by the Government

Secretary of the Power Division Zargham Eshaq Khan said that government has planned on using Jamshoro and Muzaffargarh power plants on RLNG as alternatives. Furthermore, most of the furnace oil-based plants might also run on RLNG because of the higher cost of furnace oil.

The managing director of NTDC Zafar Abbas assured that in light of the recent events, huge costs for energy transmission and growing demand, a plan had been put in place to upgrade the transmission lines.

Senator Shibi Faraz instructed the Power division to provide the list of defaulters in all categories; industry, domestic and commercial. He further added that the target of the special committee is to abolish the menace of circular debt.